Keep Your Insurance? Not Everyone.

Summary

President Obama has repeatedly said that under the health care overhaul efforts in Congress, "if you like your health care plan, you keep your health care plan." But he can’t make that promise to everyone.

In fact, under the House bill, some employers might have to modify plans after a five-year grace period if they don’t meet minimum benefits standards.

Furthermore, some firms are likely to buy different coverage for their workers than they have now, or simply drop coverage and pay a penalty instead, leaving workers to buy their own private coverage or go on a new federal insurance plan.

The legislation is a moving target, and projections of how many employees would be switched to a federal plan are wide-ranging – from near zero to a high of 56 percent of all covered workers under the most extreme assumptions. We sort through several scenarios.

Analysis

Obama, Aug. 15: [i]f you like your health care plan, you keep your health care plan. Nobody is going to force you to leave your health care plan. If you like your doctor, you keep seeing your doctor. I don’t want government bureaucrats meddling in your health care. But the point is, I don’t want insurance company bureaucrats meddling in your health care either.

But he also said: "I expect that after reform passes, the vast majority of Americans are still going to be getting their insurance from private insurers."

There will be some movement in how people get their insurance under the legislation in Congress – and Obama’s second comment acknowledges that. But his if-you-like-it-you-can-keep-it claim ignores the fact that employers may well choose to buy a different health insurance plan once any health coverage overhaul takes effect. In a late June press conference, ABC News’ Jake Tapper asked Obama about his claim, saying that employers might be attracted to a cheaper federal plan. Obama said: "When I say if you have your plan and you like it, or you have a doctor and you like your doctor, that you don’t have to change plans, what I’m saying is the government is not going to make you change plans under health reform."

That’s true – the government won’t switch your plan for you under these bills. But that’s not exactly the claim the president is making. How many employees could be subject to an unwanted change of insurance is tough to predict. Part of the dilemma concerns the proposed federal health plan and how much cheaper it might be, or not, than private insurance. The House bill as introduced structures the federal plan in a way that would attract more employers than the House bill as amended by the Energy and Commerce committee. A Senate bill is similar to the amended House version. Here’s what could happen under the various bills:

No one "forced" onto federal plan. Obama said "[n]obody is going to force you to leave your health care plan." That’s true enough. The legislation wouldn’t require anyone to switch health insurance – though, in most cases, plans would eventually have to meet minimum benefit standards. The bills don’t require anyone to join the federal plan. The House bill also has a provision that allows those who purchase their own insurance (those who don’t get insurance through an employer) to keep their plan as long as they’d like, as long as the insurance company keeps offering it. Their policies wouldn’t have to meet the new minimum benefits requirements that will be decided by the Health and Human Services secretary.

Minimum standards. Businesses, however, would have to meet minimum benefits standards and would have a five-year grace period to do so under the House bill. Insurance companies could react in different ways, perhaps modifying any plans that don’t meet the standards or dropping those plans as an option. We can’t predict that. It’s unclear which or how many businesses would possibly be affected by this.

Federal plan, House bill as introduced. A greater factor in the ability to keep one’s plan, however, is the federal health insurance option (what Obama calls the "public plan"). The House bill as introduced would set payment rates to doctors at Medicare rates plus 5 percent in this federal plan. Medicare rates are about 20 percent lower to doctors than payments by private insurance. That would make the federal plan noticeably cheaper than the average for private insurance. Estimates on how much cheaper, and consequently how attractive to those eligible to join the plan, differ.

The Lewin Group estimated that premiums would be 20 percent to 25 percent cheaper under the federal plan. A study by the Lewin Group, a subsidiary of UnitedHealth Group that operates independently of the health care company, found that under this scenario in the original House bill, 33.6 million would go onto the federal health plan. That number includes individuals who buy their own coverage and employees of small firms with under 20 employees (those eligible in the second year after the House bill would take effect). The nonpartisan Congressional Budget Office, however, estimated that premiums would be about 10 percent cheaper under the federal plan. The CBO and the Joint Committee on Taxation said 11 million to 12 million people would join the federal plan if open to firms with under 50 employees. That’s about a third of the Lewin estimate. Those numbers, too, include both individuals and employees of small firms.

Also, the House bill says that more businesses could become eligible to participate in that federal plan over time. If all businesses were eligible to participate, not just smaller firms, then Lewin’s numbers jump way up, with 103.4 million joining that plan. Lewin further estimated that 88.1 million people would shift from employer-sponsored coverage to the federal plan. CBO didn’t give an estimate for such a scenario. And of course, we can’t say whether or not the administration would actually make larger companies eligible.

Under Lewin’s estimate of the worst-case outcome, 56 percent of all workers covered by employer-sponsored insurance in 2011 under current law would instead have coverage through the federal plan. But if the federal option remained open only to small firms, the percentage switching would be 14 percent under the Lewin estimate, about 7.6 percent under CBO’s estimate.

House bill, as amended, and Senate plan. But these details in the House bill were amended by the Energy and Commerce Committee, making that version similar to what the Senate’s Health, Education, Labor and Pensions committee bill proposed. And under those versions of legislation, the federal option doesn’t have as much of an effect on current insurance plans.

Both of those health overhaul plans would have the federal option negotiate payment rates to providers rather than setting them by government fiat. That would make premiums more in line with private rates. The CBO said that with negotiated rates the federal option wouldn’t have much of an impact:

CBO, analysis of Senate HELP draft: The new draft also includes provisions regarding a “public plan,” but those provisions did not have a substantial effect on the cost or enrollment projections, largely because the public plan would pay providers of health care at rates comparable to privately negotiated rates—and thus was not projected to have premiums lower than those charged by private insurance plans in the exchanges.

The Lewin Group still estimated there would be an impact, albeit a much smaller one. This type of federal plan would attract an estimated 17 million people, with 10.4 million moving off private plans, another Lewin study projected (see Figure 4). That’s if the plan were open to individuals and small businesses. And if such a federal plan were open to all businesses, the numbers don’t go up by much: 20.6 million would join the federal option, with 12.5 million moving off private plans, according to Lewin.

House committees are still negotiating to arrive at a final version of the House bill, though the president indicated on Saturday that this structure had won: "Now, what’s happened in the House bill, that as it’s been modified, is they’ve actually said we’re going to negotiate rates, they won’t be Medicaid rates," Obama said.

The insurance exchange. Leaving the federal plan aside, individuals and small businesses – and perhaps more businesses down the road under the House bill – would be eligible to choose from various private plans in a new health insurance exchange as well. If an employer decided to offer coverage through the exchange, employees would have their pick of various plans in that new health care marketplace.

Clarification, Aug. 18: We originally wrote that employers might "find a more attractive option" in the exchange and "switch plans." But that’s not exactly how the exchange would work. Employers would decide which level of coverage they’d like to offer (a "basic plan" or a "premium plan" would be among the benefit choices under the House bill); employees pick among the plans in that category. Aaron Albright, a spokesman for the House Education and Labor Committee, explains that "the employees get to decide if they’re in the exchange … what best fits their needs. Sometimes the public option might be a little cheaper but might not be as convenient" as another insurance plan.

It’s important to note that as things stand now, employers can and often do switch their employees’ coverage, or even drop it.

The legislation in Congress, however, would require employers to offer coverage (the so-called "employer mandate"), and it provides penalties for those who don’t contribute to their employees’ insurance, as well as subsidies to entice small businesses to offer coverage. Still, the CBO estimated that under the House bill, some firms, likely those with lower-wage employees, would decide to stop offering insurance. The mandate penalty might cost them less than providing coverage, and their low-wage workers would be eligible for federal subsidies to help them buy their own coverage through the exchange. The CBO estimated that "in 2016, about 3 million people (including spouses and dependents of workers) who would be covered by an employment-based plan under current law would not have an offer of coverage under the proposal."

So, can you keep your insurance under the health care proposals in Congress? Answer: It depends.

And it depends mainly on the proposed federal plan, which may not be part of whatever emerges from Congress. Health and Human Services Secretary Kathleen Sebelius told CNN on Aug. 16 the federal option was "not the essential element" of health care legislation.